RE:RE:why do they keep selling 50% interest in their propertiesCANCDN wrote: Because they get 50% of the actual property value and partner with a condo development company.
Its less risky and allows RioCan to have mutliple projects on the go. They couldnt possibly manage that many development properties.
Also, they are selling at a higher price, so in essence, it increases the value from a financial basis.
How does that work?
Let's say Riocan owned the land for ages and put money into development. Land cost $5 million, development another $5 million. Total value from a financial basis: $10 million.
Now, if they sell 50% of it for $10 million, then the half they kept can now be valued on the books as $10 million, and they have the $10 million they got for the other hald. Total value from a financial basis: $20 million.
Doing this increases the value of the assets on the books, and the creditors see it this way as well, helping them to get better terms with their bankers, and it further deleverages their business.